FDIC may alter rate banks pay to insure deposits

Banks could see a change in the rates they pay to insure their deposits in about six years.

Whether those rates will be higher or lower will depend on a number of factors, including how the U.S. economy performs between now and then, Federal Deposit Insurance Corp. officials said.

The FDIC expects its Deposit Insurance Fund reserve ratio to be at its minimum designated ratio of 1.15 percent by the second half of 2018, staff said at an FDIC board of directors meeting Monday in Washington, D.C.

The minimum ratio slipped to below 1 percent because of a rash of bank failures over a more than three-year period that began in 2008. Dealing with those failures lowered the amount of money in the fund, which is used to cover the losses in certain deposit accounts when a bank fails.

In its update this week, the FDIC said the reserve ratio of the fund was at 0.17 percent and the balance was at $11.8 billion.

Once the reserve ratio reaches 1.15 percent, the regulatory agency will develop plans to increase that ratio to 1.35 percent by Sept. 30, 2020. The increase is mandated in the Dodd-Frank Wall Street Reform and Consumer Protection Act. FDIC staff expects to have a proposal on how to raise that reserve ratio when it reaches 1.15 percent.

FDIC spokesman David Barr said a number of factors will have to be considered to determine what the rates of deposit insurance premiums will be, including how the national economy is performing at the time. If overall rates have to increase to get to that 1.35 percent reserve ratio, FDIC officials will have to weigh how the industry is doing along with the economy. He said the agency doesn’t want to implement an increase that would affect a bank’s financial condition during an economic downturn, for instance.

The goal is to have a rate structure that bankers can be confident in.

“What we’ve always wanted to do with deposit insurance premiums is give banks certainty about what they are going to pay,” Barr said.

Brian Chamberlin, president of Andover State Bank, said he’s satisfied with what he read in the report officials presented to the FDIC board.